Éva Berde
Corvinus University of Budapest
Mánuel László Mágó Corvinus University of Budapest
Abstract
The first half of this paper argues that Hungary, similar to other European welfare states, needs older people to re-enter or stay on the job market due to the aging of the population and the increase in people’s expected healthy years. Many people are staying on the job market longer, and many government programs are also focused on incentivizing older people to stay active. However, based on some results in the literature it seems that employers tend to prefer younger job applicants when making hiring decisions. This bias is most likely because potential employers do not believe that older applicants can acquire new skills that are required for the job. We conducted an experimental audit study to uncover potential biases against older applicants and our results seem to point in the direction that there is one. In our study we constructed fictitious CVs of two pairs of women, a younger and an older in each pair, and sent them out to apply for actual job postings.
The first pair of fictional ladies applied for positions as economic analysts and the other two women as economic assistants. We observe that based on the responses to the applications, the older applicants had a lower acceptance rate. As for the differences in the two types of postings, we observed that the bias is stronger for the analysts than for the assistants. This might be due to the required qualifications for these jobs. We build a relatively simple toy model to quantify the bias.
Keywords: age discrimination, aging society, audit study, model of employer’s behavior.
72
Introduction
In the 1900s in the US37 it was common for ordinary men to be engaged in some income-generating work in their whole lives, meaning that older men often worked until their death.
This is not true however, for women, as based on some social norms, in families with a high enough income, they were the ones who stayed home. According to Borjas and Van Ours (2010), 63.1% of the men older than 65 worked in 1900, while in 1990 this dropped to 16.3%. The situation was similar in the early 1900s in Europe as well, but in the last third of the 20th century in most of the welfare states of Europe the employment rate of the age groups above 55 and especially above 65 dropped even more than the one in the US. The rate started to increase only in the last fifteen years of the twentieth century, which was most likely caused by the aging of the population and the decrease of the share of younger people who take part in the economic value generating process (Eichhorst et al. 2014; Van Dalen, Henkens and Schippers 2009).
From now on, we mainly focus Europe and Hungary, but we try to keep the literature review as broad as possible. In almost all the European welfare states (including Hungary), governments were forced to change their pay-as-you-go pension systems as a response to the aging of their populations. This tendency will most likely continue in the future (Gruber and Wise 2005). The most common way governments are trying to solve the issues are the continuous increasing of the retirement age, the abolishment of early retirement, and the replacement of the system of defined benefits with the system of defined contributions. These methods have a so-called push effect and are complimented by the so-called pull effects. These effects are due to older people who want to re-enter or stay longer on the job market. Many older people decide to stay on the job market longer because they have a potential to live longer and in good health, or simply for other economic reasons, like to increase their income further (Hudák, Varga, and Várpalotai 2015). As Berde and Rigó (2019) point out, the pull effect is stronger if older people decide to stay on the job market voluntary and not by some law imposed on them by the government. Button (2019) estimates that the pull effect contributed more to older people’s
37 There are detailed employment statistics in the literature for the US, but we were unable to find similar statistics for Europe. However, it is reasonable to assume that the European labor market is similar to the American one in the aspect mentioned.
73
job market activity in the US, than the push effect, even if in retirement options are stricter and less favorable than those in Europe. In the OECD countries the motto live longer, work longer is becoming more and more popular, which includes the popularization of the positive aspects of the pull effects (Martin 2018; Vodopivec and Dolenc 2008).
In most European countries, the activity of older people on the job market is viewed in two different ways. Governments often try to increase the number of years citizens need to be working, but potential employers seem to have a preference towards younger employees.
Our paper tries to show this latter in Hungary. In an issue of the Hungarian Central Statistical Office (KSH) from 6-7 years ago it was stated that „Delaying retirement seems controversial from the pure viewpoint of the labor market. The financial pressure on the pension system might be decreased by keeping the older generations on the job market, but in the period of economic stagnation, this might make it more difficult for younger people to enter the job market and thus becoming contributors to the system.„ (KSH 2013, 2. page last paragraph). This sentiment seems to be in contradiction with the findings of Gruber, Milligan, and Wise (2009), who showed that the presence of older people on the job market does not affect the job opportunities of younger people in a similar way as the increase in the employment of women did not affect the opportunities of men.
Our paper shows with the help of an experimental study that contrary to the reasoning of Gruber, Milligan, and Wise (2009) Hungarian employers seems to discriminate against older applicants. We crafted the CVs of two pairs of imaginary women, an older and a younger in each pair. We sent the CVs to actual job postings, in the case of the first pair for economic analyst positions, and for economic assistant positions for the second pair.
According to our results, for both pairs, the older applicant seemed to receive fewer positive reactions. There also seemed to be a difference between the two job categories as well, the older applicant for the analyst position got the least positive feedback. We use the data to parametrize a simple model that helps us to quantify age discrimination under certain assumptions. With the help of the model we can explain that our results may be since positions where the acquisition of new skills is required age discrimination is more severe.
The paper is organized as follows. In Section 2 we compare the employment rate of the older age groups in Hungary with the average of the European Union and that of the total
74
population. We also show the differences between the employment rate of men and women in Hungary. In Section 3 we discuss the theory behind testing discrimination on the job market. In Section 4 we discuss the results of our experiment. In Section 5 we introduce our model and describe how we can quantify age discrimination based on our data. Finally, Section 6 concludes.